Protein tyrosine phosphatases (PTP) are emerging drug targets for the prevention and/or treatment of cancer, diabetes, autoimmune diseases and other common human ailments. High throughput screening (HTS) for PTP inhibitors is currently performed using enzyme-based assays and simple non-peptide phosphotyrosine (pTyr) analogs, such as para-nitrophenylphosphate (p-NPP) and 6,8-difluoro-4-methylumbiliferyl phosphate (DiFMUP). An obvious limitation of these universal substrates is their lack of enzyme specificity. Also at present none of the available PTP substrates is amenable to detection of intracellular PTP activity, thus precluding the development of cell-based PTP assays. There is an urgent need for new specific PTP assays, suitable to both enzyme-based and cell-based HTS for small molecule PTP inhibitors. We recently generated a novel fluorescent pTyr analog, phosphocoumaryl-amino-propionic acid (pCAP), which can be incorporated into peptides. Peptides containing pCAP are excellent and specific PTP substrates. pCAP-based PTP assays are highly sensitive and direct, and can be used to detect intracellular PTP activity. In this proposal we will optimize pCAP-peptides as substrates for novel, specific PTP assays suitable to enzyme-based and cell-based HTS of PTP inhibitors. We will show that pCAP-peptides have better specificity profiles than DiFMUP when used as PTP substrates in enzyme-based assays. We will also show that specificity of pCAP peptide can be further improved using a library-screening approach. Highly specific pCAP-peptides will then be used to validate an innovative cell-based PTP assay and optimized for HTS of small molecule PTP inhibitors. We will use the lymphoid tyrosine phosphatase (LYP) as our model PTP as our recent work renders LYP a novel drug target for human autoimmunity. We predict that our new cell-based PTP assay will provide a revolutionary paradigm in HTS for PTP inhibitors in both the academic and industrial setting.